Minister for Public Expenditure and Reform Brendan Howlin was adamant last night that savings of €300 million in the public pay bill would have to be found this year despite the collapse of the Croke Park II deal.

His comments came as unions warned of industrial action in the event of the Government pressing ahead with pay cuts on a unilateral basis.

The Ictu executive committee is due to meet today to discuss its response to the rejection of the Croke Park II proposals.

The rejection of the deal by a significant majority presents a major headache for the Coalition, and in particular for the Labour.

Mr Howlin spoke to EU-IMF troika representatives on the phone last night to explain the significance of the vote and will meet them next week for more detailed discussions.

The rejection of the deal by union members in effect led to the collapse of the Government’s strategy to secure the savings by agreement with staff. However, earlier the Minister emphasised the Government’s budgetary arithmetic had not changed as a result of the rejection of the proposed deal and that savings in the public service pay bill would have to be found to meet targets.

Mr Howlin said some time for reflection on the outcome would be required before the Government made a decision on how to proceed.

The Cabinet will consider the issue at its weekly meeting next Tuesday but it is not expected that a decision on how to proceed will be made at that stage.

The options facing Mr Howlin are to impose a 7 per cent pay cut across the public service over the next three years to generate €1 billion in savings sought by the Government or to find a way of tweaking the agreement to provide for smaller pay cuts allied to flexibility in working arrangements.

However, the timescale for any new re-engagement by the Government with the unions would be very short.

Any revised deal would have to be put out again to ballot and, to meet the Government deadline of July for savings to come on stream, any new talks would have to be completed by the end of May or so.

Tweaking the existing proposals to encourage unions such as Siptu or the Irish National Teachers’ Organisation to adopt revised proposals would probably mean deeper cuts elsewhere and there would be no guarantee they would not be rejected a second time.

Any decision to impose pay cuts would require legislation and that would create difficulties for Labour TDs. Trade unions have also warned of industrial action in the event of the Government pressing ahead with pay cuts unilaterally.

The Labour parliamentary party is expected to discuss the issue at its weekly meeting this evening. The chairman of the parliamentary party, Jack Wall, told
The Irish Times
last night that all sides should be given some time to reflect on what should happen next. “The deal has been soundly rejected and that has to be acknowledged.

“There is a need for cool heads to look at the situation and take the time necessary to reflect on the options,” he said.

Tánaiste Eamon Gilmore said: “There is a reality that we have €300 million of savings to make this year. Those savings were dependent on agreement being reached and there’s a billion that has to be made over the period up to 2015 that the agreement was to address.

“The result of the ballot doesn’t change the reality that savings have to be made.”

Earlier, Siptu president Jack O’Connor warned that any move by the Government to legislate for pay cuts for public services staff would “inevitably precipitate a major confrontation”.

He said Siptu would fight if it needed to and had the financial resources to undertake industrial action.